Melville v. Hop Energy, LLC

Background

Ryan Melville sued HOP Energy, LLC on his own behalf and on behalf of a proposed class. He asserted claims for breach of contract and breach of the implied duty of good faith and fair dealing. Melville alleged that HOP Energy promised to charge its “Promotional Prevailing Retail Price for First Year Customers” after the initial capped-price period, but instead charged prices higher than prevailing retail prices.

Melville alleged that he signed the contract on October 19, 2018, and that HOP Energy continued delivering heating oil after the capped-price period ended on October 31, 2019. He alleged that an analysis comparing HOP Energy’s invoices with Connecticut and New England heating-oil price data showed that HOP Energy’s prices were higher than the reported prevailing prices throughout the relevant period, with an average overcharge of approximately 42% to 46% depending on the comparison used.

The proposed class consisted of certain HOP Energy customers in Connecticut, Delaware, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont who purchased heating oil under contractual terms tying prices to prevailing retail prices. The opinion does not decide whether a class should be certified.

Motion to Dismiss Standard

HOP Energy moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. At this stage, the court accepts well-pleaded factual allegations as true, draws reasonable inferences for the plaintiff, and asks whether the allegations plausibly support relief. The court does not decide disputed facts or determine whether Melville will ultimately prevail.

Choice of Law

The contract did not contain a choice-of-law provision, and the parties did not brief whether New York or Connecticut law applied. The court declined to make a formal choice-of-law determination because it found that the relevant contract principles were aligned. It resolved the motion under New York law.

Breach of Contract

The court held that the phrase “our Promotional Prevailing Retail Price” was ambiguous. The contract did not define that phrase or clearly give HOP Energy unlimited discretion to set prices. The word “prevailing” could refer either to a widespread or market price or to a current price, and the words “promotional” and “prevailing” could reasonably lead a customer to understand that the price would be competitive with, or lower than, regional retail prices.

Because the contract could reasonably support Melville’s interpretation, the court considered the October 14, 2019 letter stating that HOP Energy’s prevailing retail price would fluctuate with the cost of oil, along with Melville’s alleged price comparisons. The court concluded that Melville plausibly alleged that HOP Energy breached the contract by charging prices materially different from reasonable measures of prevailing retail prices. It therefore denied the motion to dismiss the breach-of-contract claim.

Implied Duty of Good Faith and Fair Dealing

The court also allowed Melville’s claim that HOP Energy breached the implied duty of good faith and fair dealing. Although such a claim is often dismissed as duplicative when it relies on the same conduct as a contract claim, the court found that Melville alleged a potentially distinct theory: even if HOP Energy had some discretion to set prices, it allegedly exercised that discretion arbitrarily or in bad faith by charging commercially unreasonable rates.

The court noted that it might later determine that the good-faith claim is subsumed by the contract claim, depending on how the contract is interpreted and what the evidence shows. But that issue could not be resolved on a motion to dismiss. The court therefore denied the motion on this ground as well.

Contract Notice Provision

HOP Energy argued that Melville’s claims should be dismissed because he did not allege compliance with a contract provision requiring customers who believed their bills were wrong to write to HOP Energy within 60 days. The court rejected this argument. The provision did not clearly say that such a written notice was a prerequisite to filing a lawsuit, and the phrase “preserve your rights” did not clearly identify which rights would be lost. Because conditions required before filing suit must be stated clearly, the court held that the provision did not unambiguously create such a condition.

Leave to Amend and Disposition

The court granted Melville leave to amend the complaint to add a claim under New York General Business Law § 349. The court cautioned that such a claim requires the consumer transaction to have occurred in New York. Melville was given 30 days to file an amended complaint, which would replace rather than supplement the existing complaint.

Judge Kenneth M. Karas denied HOP Energy’s motion to dismiss, granted Melville leave to amend, terminated the pending motion, and scheduled a status conference for May 9, 2023. The court did not decide whether HOP Energy actually breached the contract or acted in bad faith.